Key Reasons Why Chapter 7 Bankruptcy Appeals To People In Serious Debt
Posted on: 25 March 2021
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The federal court system makes available legal options to help debtors regain control of their finances and prevent serious financial distress. People with debts that they cannot pay can file for bankruptcy to have some or all of them liquidated.
However, when you consider which form to file, you need to be aware of what each chapter can offer to you. When you want a relatively quick resolution to your debts, you may decide to file for Chapter 7 bankruptcy.
Liquidating Debts
A Chapter 7 bankruptcy allows you the opportunity to have all of your qualifying debts effectively liquidated or forgiven when your case is discharged. The most common debts included in this type of filing include medical and credit card bills, payday loans and car loans. Student loans, back child support and defaulted state or federal taxes cannot be forgiven in a Chapter 7 bankruptcy.
Still, once these debts are discharged, you are no longer legally or financially responsible for them. Your creditors cannot, by law, expect you to pay them. They also cannot take any kind of legal action against you for the debts after the court discharges your Chapter 7 bankruptcy.
Federal Stay
A Chapter 7 bankruptcy also will put a stay order in place against your creditors. Once your lawyer files your case, he or she can secure an immediate stay. This stay will be sent to all of your creditors, even those who hold your student loans and defaulted child support accounts, to notify them that they cannot legally contact you. This stay will remain in effect during the entire time that your case is pending in court.
If your creditors contact you when the stay in in effect, they are in violation of the court order. They can be found in contempt of court and ordered to pay all of your court costs. They can also incur fines and even be forced to discharge a non-qualifying debt.
Finally, a Chapter 7 bankruptcy can give you a fresh financial start. You no longer owe debts that have been discharged. You can also make new payment arrangements on debts, such as student loans, that you cannot get legally liquidated.
A Chapter 7 bankruptcy can offer you a number of benefits. It lets you liquidate debts like medical and credit card bills. It also puts a stay against your creditors and gives you a new financial start.